ALBANY, N.Y., May 13 (UPI) — New York State has begun to investigate banks that secured strong ratings for securities that proved to be losing investments, sources told The New York Times.
The investigation is looking into the relationships between eight major banks and the credit rating agencies Standard & Poor’s, Moody’s Investors Services and Fitch Ratings that continued to endorse mortgage-backed securities in the years before the housing bubble began to collapse, the Times reported Thursday.
The banks under investigation are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch.
Investors lost billions of dollars purchasing bundled securities that were given high ratings.
Sources said the inquiry is focusing in part on banks that hired former rating-agency employees, who were put to work assembling deals that were presented to the credit services for approval.
One such banker, Shin Yukawa, was lured away from Fitch Ratings by Goldman Sachs in 2005 with a million-dollar pay package, the newspaper said.
Yukawa, who did not respond to a request for an interview, worked on the Abacus 2007-AC1 bonds the Securities and Exchange Commission charged in a lawsuit that Goldman secretly rigged to fail.
Goldman Sachs spokesman, Samuel Robinson, said, “Any suggestion that Goldman Sachs improperly influenced rating agencies is without foundation.”
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Tags: Credit Rating, Rating
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